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LONDON (Reuters) - A policy group of the Conservative Party, trying to regain momentum after poor poll results, called on Friday for tax cuts and deregulation, but the government dismissed its proposals as a lurch to the right.

A 210-page report on economic competitiveness by right-wing legislator John Redwood and Simon Wolfson, chief executive of fashion retailer Next, blamed the European Union for much costly red tape, and recommended a future Conservative government opt out of EU employment and social regulation.

The economy has grown during each of the last 10 years of Labour Party rule, but Redwood said it could do much better.

"We believe a lower tax rate economy would be a more successful economy," he told a news conference.

Redwood's is one of a number of policy groups whose findings will feed into the opposition Conservatives' next election manifesto. Shadow chancellor George Osborne said the leadership would consider the proposals carefully.

The Redwood group recommended abolishing unpopular death duties and cutting taxes on company profits, share and property sales. Reductions in regulation and bureaucracy could save 14 billion pounds a year, he said.

Speculation has been mounting that Prime Minister Gordon Brown could call a general election this year or next to capitalise on his early popularity.

David Cameron has, since becoming Conservative Party leader in 2005, steered the party towards the centre in an attempt to end a run of three consecutive general election defeats.

He has come under attack from right-wingers angry with him for dropping traditional Conservative policies.

The Conservatives consistently led in opinion polls in the final year of Tony Blair's premiership but have trailed since Brown replaced Blair on June 27, and are now as many as 10 points behind Labour.

IMPROVING TRANSPORT

Redwood's report called for action to improve the overstretched transport system, which it said was a key challenge to economic competitiveness. It proposed a 50 percent expansion in rail capacity and the increased use of private-sector funds to build roads.

Chief Secretary to the Treasury Andy Burnham said in a statement that the report showed Cameron had been forced to "cave in" to his party's right wing to shore up his weakened position.